Amid FTX’s demise this month, what has received less attention is the failure of projects that attempted to employ the underlying crypto ledger technology in private, corporate settings, the once-hyped enterprise blockchain ecosystem.
TradeLens, a blockchain system developed by IBM and intimately associated with the shipping company Maersk, announced its closure this week, claiming a lack of economic traction. Two weeks ago, the Australian Securities Exchange (ASX) revealed it was abandoning a 2016 much-delayed blockchain intended to replace the equity market’s clearing and settlement system.
In the early years of 2015 and 2016, several banks and large corporations saw the potential of bringing blockchain technology into private, firewall-protected realms where companies could track assets and distribute immutable records of their existence.
The business blockchain industry, which does not appear to face the same optimistic and negative market cycles as public crypto, is currently experiencing a shift in the larger economic climate, particularly in the shipping industry. According to Lars Jensen, CEO of Vespucci Maritime, a shipping industry consulting firm, this is one of the reasons why TradeLens is shutting down.
Jensen stated that the container shipping sector had two years of astronomical earnings, which made it possible to seek all sorts of technology solutions. Now that the tide changed, the industry will be under intense pressure. Thus, it is crunch time for all technology solutions currently available. Regarding TradeLens especially, Jensen noted great competition in the container shipping track-and-trace market.
TradeLens intended to offer everything to everyone. However, other visibility suppliers on the market are significantly more specialized. They concentrate on certain stakeholders or aspects of the process, and their commercial success is far greater. Also, this could indicate that the market is less receptive to comprehensive, one-stop-shop solutions and more receptive to customized, tailored solutions for specific problems.
Richard G. Brown, CTO of R3, the developer of the Corda enterprise blockchain and one of the earliest startups in the space, stated that while the shutdowns of TradeLens and the ASX blockchain occurred in rapid succession, the reasons for the shutdowns are very different.
According to Brown, the faults of the ASX initiative have more to do with stakeholder involvement than technological selections.
Paul Brody, head of the blockchain at global consulting company Ernst & Young, feels that private blockchains are fundamentally wrong. Brody and his team have been longtime proponents of enterprise adoption of the public Ethereum blockchain, including using technologies such as zero-knowledge proofs to make the technology acceptable to large corporations.
“All of these private blockchain initiatives face the same fundamental issue,” Brody explained. “It’s a Web2 business model, but a little bit of Web3 pixie dust sprinkled on. And once the pixie dust kind of wears off, the value proposition doesn’t look so hot.”